Update: Job fears at Vodafone as cost cuts to double

10th Nov 2009 14:50

Vodafone traded in line with expectations during the first half, but fear is that jobs could go as the mobile giant doubles its cost-cutting programme to £2bn.Chief executive Vittorio Colao said he expects to deliver £1bn cost reduction programme a year ahead of plan and a further £1bn of cost savings by 2012.It will achieve this "by leveraging on network, sourcing and infrastructure scale across a wider geographic area, and through further overhead reduction.""We expect that around half of these savings will offset inflationary and volume pressures, and the remainder will be used for commercial reinvestment and margin enhancement," the firm said.The news came as Vodafone announced a 9.3% increase in revenue for the six months ended 30 September to £21.76bn, although organic revenue was down 3%. Adjusted operating profit, which rose by 2.4% to £5.91bn, it forecast to be between £11-11.8bn for the full-year. Pre-tax profit rose 3.6% to £5.48bn.Nomura Securities predicted revenue of £21.8bn and adjusted operating profit of £5.95bn. Vodafone giant said a positive contribution from Verizon Wireless and foreign currency benefits offset lower profit in Europe. It also confirmed that expectations for capital expenditure for the 2010 financial year remain unchanged and similar to last year. There'll be "slightly" less spent in India and more in Europe."The group has performed in line with our expectations and we have made strong progress with our strategic priorities, in particular in mobile data and cash generation," said Colao.Jonathan Jackson, head of equities at Killik Capital, admitted that there was little in today's statement to excite the market, although the results were reassuring.He said there was plenty of evidence that Colao, who took over the CEO role from Arun Sarin in July last year, is getting to grips with extracting value from the business. "In the meantime, the shares remain cheap (9x FY 2011 EPS) and the 6.0% yield is very compelling," said Jackson.The interim dividend goes up by 3.5% to 2.66p a share.